- Enron Corporation, nka Enron Creditors Recovery Corporation, was an energy company with headquarters in Houston, Texas. The company was basically an energy commodities service provider that later grew into seven distinct business divisions. Its expansion included broadband services, stock trading, and futures trading.
Enron had its beginning in 1931 as the Northern Gas Company. The company was later bought and reorganized. Along the process, its name was changed to Enron in 1985 with Kenneth Lay as its chief executive officer.
Enron was a public company with shares trading on the New York Stock Exchange.
- Enron was involved in a lot of business transactions that went down the drain. But some of these losses were unreported as such in its balance sheet, while other losses were reflected as assets. It was later found out that its profits and revenues were inflated due to an irregular accounting system that it was employing. Its external accounting firm, Arthur Andersen, was dissolved for allegedly aiding Enron manipulate its balance sheet data.
- Enron’s officers at the time of its demise were: Kenneth Lay, Chairman of the Board; Jeffrey Skilling, Chief Executive Officer; Andrew Fastow, Chief Financial Officer; and Sherron Watkins, Vice President for Corporate development, who was called the “whistle-blower.” Arthur Andersen was the external accounting firm.
Kenneth Lay became too trusting of his subordinates’ ways and means that he failed to stop them from ruining the company. It he weren’t too lax as board chairman, he would have asked the erroneous accounting to be corrected and made public disclosures about them.
But he was weak and let the others run the company to the ground. As for Jeffrey Skilling and Andrew Fastow, they were distracted by their desires to enrich themselves at the expense of investors. They collaborated and hidden the losses, while making it appear that Enron was very healthy. Sherron Watkins for her part did what she thought was all she could do about it.
She by-passed Skilling and wrote directly to Lay, thinking that as Chairman of the Board, he would have the guts to rectify a grossly wrong business process. Arthur Andersen, as an external auditor, failed to perform its duty and honor to protect the public by reporting errors that it discovered at Enron. Instead of advising Enron to correct flaws, it helped Enron hide them.
- I believe that the absence of corporate ethics in most of Enron Corp.’s senior officers lead to its failure. By not following a strict of conduct that is sound and moral, the company’s officers drove Enron into bankruptcy. Rating each of them on their personal ethics:
Kenneth Lay = medium;
Jeffrey Skilling = low;
Andrew Fastow = non-existent;
Sherron Watkins = high; Arthur
Arthur Andersen = low.
- The board of directors should consider their decisions based on this ranking: stockholders, corporate officers, rank and file employees, customers, suppliers, government, and the general public. I’ve based this ranking on the fact that the board of directors has a fiduciary duty to safeguard the interests of its investors. It must ensure that their investments will be profitable.
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The officers and rank and file employees are the backbone of the company so the board of directors must ensure next that their interests will be protected. Customers and suppliers, come next in the ranking because they’re the ones who make it possible for the company to stay in business. The government and the general public came last because the board of directors of corporations are only obliged to follow the legislative rules governing business transactions and inform the public about them.
McLean, B., Elkind, P. (2003). Smartest Guys in the Room: The Amazing Rise and Scandalous
Fall of Enron (Hardcover). England: Penguin Group.
Pellegrini, F. (2002, January 18). Person of the Week: ‘Enron Whistleblower’ Sherron Watkins.
Time. Retrieved January 25, 2008, from